Payment Options for Export Import Trade Part I - New Internet-based Payment Options

Internet has added a new dimension in international business - not just in marketing or product promotion, but in other areas also - like payment processing. As an Internet savvy export import professional - you now enjoy more options to pay or collect payment from overseas customers.

We review here all payment options - traditional and new ones, with emphasis on new payment options like escrow, paypal, credit card etc.

As an exporter, you should review the new options and adapt yourself accordingly as your buyers from more advanced countries may demand new payment options for convenience and ease of use. Failure to adapt yourself means loss of potential customers and gifting an edge to your technologically advanced competitors at home or abroad.

The basic structure of Internet-based new payment systems remains same as that of traditional ones, i.e. buyer <=> intermediary <=> seller. However, as you will see in this article, the role of intermediary has undergone sea change to adapt itself to special requirements of on-line environment.

Role of Intermediary in International Payment

A reliable intermediary is essential for any secure payment system - specially so when buyer and seller are from different countries - separated by thousands of miles.

Traditionally, banks have played this role of reliable intermediary. Though they still are the most important intermediary in International business - new entities are entering the intermediary field.

Apart from establishing its credibility as neutral referee - the intermediary, in on-line environment, has to ensure safe and secure transaction. As a result, technology plays a very important role for this new generation intermediaries.

Methods of Payment

Buyer's comfort is an essential pre-condition for any international transaction. The buyer has to be satisfied that ordered products have been delivered before payment is released. The intermediary has to safeguard interests of both buyer and seller.

Most export sales agreements stipulate, in some manner, that certain collection documents must be submitted in advance by the exporter to the buyer or its bank in order to generate payment once the goods have been received. The main documents include commercial invoices (the exporter's bill of sale), consular invoices (required by some foreign countries), certificates of origin (attesting to the origin of the exported goods), import licences (some countries require importers to obtain these), inspection certificates (health or sanitary certificates are required by many countries for animals, animal products, plants, and other agricultural products), and dock and insurance receipts.

Payment Options in International Business

  • Letter of Credit (L/c)

  • Escrow

  • Paypal

  • Credit Cards

  • Payment in Advance with Order

  • Payment Prior to Shipment / Partial Payment

  • D/A (Delivery against Acceptance)

  • Funds Collection via Banks

  • Documentary Collections

  • Wire Transfer / TT (Telegraphic Transfer)

  • M/T (Mail Transfer) Bank Draft / Cashier's Check

  • Open Account Credit

  • Goods Shipped "On Consignment

  • Counter trade (Barter, Counter purchase and Offset) etc.

Happy and Safe Surfing

Dr. Amit K Chatterjee

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Source: FAIDA - Newsletter on Business Opportunties from India and Abroad Vol: 4, Issue 20 ; Jan 15' 2004

Author : Dr. Amit K. Chatterjee
(Amit worked in blue-chip Indian and MNCs for 15 years in various capacities like Research and Information Analysis, Market Development, MIS, R&D Information Systems etc. before starting his e-commerce venture in 1997. The views expressed in this columns are of his own. He may be reached at )

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